Unit 1. Introduction to Food and Beverage Control

1. CUE 303
Food and Beverage Cost Control
Hanna Vi B. Polido
Instructor

2. Unit 1. Introduction to Food and Beverage Control
A. The Food Service Industry
B. Food and Beverage Control
1) Introduction, objectives, problems and Methodology of food and
beverage Control
2) Personnel Management in F & B Control
C. Cost and Sales Concept
1) Definition, elements and classification of Cost
2) Sales Defined
3) Sales Concepts
4) Cost/Volume/Profit Relationship (Break-Even-Analysis)

3. Learning Outcomes
• Discuss the food and beverage control.
• Identify the methodology of Food and
beverage control.
• Explain the elements of cost.
• Discuss the concepts of sales.
• Understand the Break-Even-Analysis.

4. A. The Food Service Industry

5. Introduction
• Successful restaurant personnel, including chefs, restaurants
manager, food and beverage controller, dining room
managers, and stewards have the ability to keep the costs at
predetermined levels. They understand that successful
operations require that costs be carefully established and
monitored so that profit will result.

6. • Food, beverage and labor costs generally represents between
60% and 70% of the total costs of a restaurant operation. If
these costs are not carefully established and monitored, they
can gradually increase until PROFIT is eliminated, and losses
are sustained.

7. • Ever-increasing competition in all industries demands that
more and more attention is paid to the control of costs to
ensure the survival of each business unit.
• In the long run a business will not survive unless it earns an
adequate amount of profit in relation to its capital. It must be
an extension of the financial and catering policies as laid down
by the top management. In order to evolve a realistic scheme
of food & Beverage control, it is essential to determine
appropriate cost and profit target for all departments of a
business.
• A Food & Beverage control system in itself will not cure or
prevent problems occurring. An effective system is dependent
upon correct up-to-date policies and operational procedures.
But the system should identify problems and trends in the
business. A food & Beverage control system will need
management action to evaluate the information produced and
to act upon it.

8. B. The Food and Beverage Control

9. Food and Beverage Control
• Food and beverage department in a hotel, restaurant, or any catering
establishment consists of closely linked system-the-Kitchen, restaurant, bar etc. In
a hotel there may exist number of systems, all of these are reading together with
the food and beverage facilities to form the total hotel system.
• The main aim of costing in a food and beverage establishment is to satisfy both the
“customers requirements” and the “financial requirements”.
• To achieve this objective a suitable food and beverage control system need to be
developed which must avoid excessive costs without sacrificing the quality,
quantity and competitive price of the varied product being marketed.

10. Food and Beverage Control
Food and Beverage Control
• Can be defined as the guidance and regulations of the cost and revenue for
operating catering activities in hotels, restaurants, and other catering
establishments.
• The main purpose of any business is to make profit.
• Profit not only is earned by sales, but also can be achieved by cost control, and
whenever money is saved, money is earned.
• According to James Keiser, “Control works best when it is used with other
management process, such as planning, organizing, directing, and evaluating”.
According to him, there are two basic approaches:
1. Behavioristic Approach
2. Traditional Approach

11. Food and Beverage Control
Food and Beverage Control
• Can be defined as the guidance and regulations of the cost and revenue for
operating catering activities in hotels, restaurants, and other catering
establishments.
• The main purpose of any business is to make profit.
• Profit not only is earned by sales, but also can be achieved by cost control, and
whenever money is saved, money is earned.
• According to James Keiser, “Control works best when it is used with other
management process, such as planning, organizing, directing, and evaluating”.
According to him, there are two basic approaches:
1. Behavioristic Approach
2. Traditional Approach

12. Traditional Approach
• The traditional approach has two main aspects.
– Directing personnel, or keeping an eye on things or by walking around to see whether he
or she can correct what is not right or what is cost control break-downs.
– measurement of performance with that desired or deemed attainable.

13. Measurement of Performance Four Parts
1. Establishing Standards or Goals: It can be expressed in different ways, for instance,
a budget figure, a percentage figure, and a performance figure, such as meals served
per server per hour.
2. Measurement of Performance: It means measuring performance, and it is usually a
quantitative figure, such as amount and percentage figure.
3. Comparison and Analysis: Once the standard or goal has been established and
actual performance is determined, it is possible to compare the two and a manager can
find out the variance.
4. Corrective Action: Once a significant variance is determined, the manager must take
corrective action. Such action must involve more observation, personnel changes, and
different methods of operation among many others, or perhaps the standard is
unrealistic and needs to be changed.

14. Objectives of F&B Control
1. Analysis of income and expenditure:
– The analysis is solely concerned with the income and expenditure related to
food & beverage operations.
– The revenue analysis is usually by each selling outlet, of such aspects as the
volume of food and beverage sales, the sales mix, the average spending power
of customers at various times of the day, and the number of customers served.
– The analysis of cost includes departmental food and beverage costs, portion
costs and labor costs.
– The performance of each outlet can then be expressed in terms of the gross
profit and net margin and the net profit.

15. Objectives of F&B Control
2. Establishment and maintenance of standards:
– The basis for the operation of any food and beverage outlet is the
establishment of a set of standards which would be particular to an operation.
Unless standards are set no employee would know in detail the standards to
be achieved nor could the employee‟s performance be effectively measured
by management. The management would have set SOPs (Standard
Operational Procedures) which should be readily available to all staff for
reference. This can be aided by regularly checking on the standards achieved
by observation and analysis and by comments made by customers and when
necessary, conducting training courses to re-establish the standards.

16. Objectives of F&B Control
3. Pricing:
– Pricing is important to determine food menu and beverage list prices in the
light of accurate food and beverage costs and other main establishment costs;
as the average customer spending power, the prices charged by competitors
and the prices that the market will accept.

17. Objectives of F&B Control
4. Prevention of waste:
– In order to achieve performance standards for an establishment, targets and
set for revenue, cost levels and profit margins. To achieve these levels of
performance it is necessary to prevent wastage of materials caused by such
things as poor preparation, over-production, failure to use standard recipes,
etc. This can only be done with an efficient method of control, which covers
the complete cycle of food and beverage control, from the basic policies of the
organization to the management control after the event.

18. Objectives of F&B Control
5. Prevention of Fraud:
– It is necessary for a control system to prevent or at least restrict the possible
areas of fraud by customers and staff. Typical areas of fraud by Customers are
such things as deliberately walking out without paying; unjustifiably claiming
that the food or drink that they had partly or totally consumed was
unpalatable and indicating that they will not pay for it; disputing the number
of drinks served; making payments by stolen cheques or credit cards. Typical
areas of fraud by staff are overcharging or undercharging for item served and
stealing of food, drink or cash.

19. Objectives of F&B Control
6. Management Information:
– It is necessary for a control system to prevent or at least restrict the possible
areas of fraud by customers and staff. Typical areas of fraud by Customers are
such things as deliberately walking out without paying; unjustifiably claiming
that the food or drink that they had partly or totally consumed was
unpalatable and indicating that they will not pay for it; disputing the number
of drinks served; making payments by stolen cheques or credit cards. Typical
areas of fraud by staff are overcharging or undercharging for item served and
stealing of food, drink or cash.

20. A. Perishability of the product:
Food, whether raw or cooked, is a perishable
commodity and has a limited life. The caterer,
therefore, has to ensure that she buys produce in the
correct quality and quantity in relation to estimated
demand, and that it is correctly stored and processed.
Problems in F & B Control

21. B. Business Volume Unpredictability:
Sales instability is typical of most catering
establishments. There is often a change in the volume
of business from day to day, and in many
establishments from hour to hour. This causes basic
problems with regard to the quantities of commodities
to be purchased and prepared as well as to the staffing
required.
Problems in F & B Control

22. C. Menu mix unpredictability:
In order to be competitive and satisfy a particular
market, caterers must often offer a wide choice of
menu items to the customers. Predicting menu items
preference on top of customer volume can be
challenge. Effective forecasting as part of the total
food and beverage control system is therefore
necessary.
Problems in F & B Control

23. D. Food and beverage operation short cycle:
The speed at which catering operations take place,
relative to many other industries, allows little time for
many control tasks. It is not uncommon that items
ordered one day are received, processed and sold the
same or next day. It is for this reason that in larger
catering establishments cost reporting is done daily or at
least weekly basis. Perishable items cannot be brought
very much in advance of their need; and the problem of
availability at times of produce relative to the price that
can be afforded in relation to the selling price.
Problems in F & B Control

24. E. Departmentalization:
Many food and beverage operations have several
production and service departments, offering different
products and operating under different policies. It is,
therefore, necessary to be able to produce separate
trading results for each of the production and selling
activities.
Problems in F & B Control